Tanzania Economy

Tanzania’s GDP in current prices was USD 57.4 billion in 2018, making it the 3rd largest economy in East Africa after Kenya and Ethiopia, and the 7th largest in Sub-Saharan Africa (source: World Bank).

The leading contributors to Tanzania’s economy in 2018 were construction (23%), followed by trade and repair (11.1%), agriculture (10.7%), manufacturing (10%), information and communication (9.5%), transport and storage (7.3%), mining (5.2%), and others (23.1%).

During the last decade (2009-2018) the country experienced strong economic growth with an average GDP growth rate of 6.6% while over the past year, Tanzania’s GDP growth slowed to 5.2%.

In 2018, Tanzania’s annual inflation rate declined to 3.5% from 5.3% in 2017 and 7.9% in 2013.

The WB classifies Tanzania as a low-income economy with a GNI per capita of USD 1,020 in 2018, against an average of USD 1,507 in Sub-Saharan Africa.

According to the Tanzanian Ministry of Finance and Planning’s 2025 Vision, the country aims to become a middle-income country by that year, which requires a GNI per capita between USD 1,045 and USD 12,736.

Tanzania’s budget focuses on the country’s development plan to build an industrial economy and improve the welfare of the citizens. To facilitate this, the Government has allocated 37% (USD 5.3bn) of Tanzania’s 2019/20 budget of USD 14.3bn to development projects in transport, oil and gas, and hydropower.

Tanzania’s GDP at current market prices reached USD 57.4bn in 2018 versus USD 53.3bn in 2017 and USD 45.7bn in 2013 with an average year-on-year growth of 6.6%.

Tanzania’s annual GDP growth rate of 6.6% over the past 5 years (2013-2018) placed the country among the 20 fastest growing economies in the world, beating the Sub-Saharan Africa average GDP growth rate of 4.4% during the same period.

However, Tanzania’s GDP growth has been slowing down in recent years, from a peak of 7.8% in 2011 to 5.2% in 2018.

Tanzania is currently pursuing its National Five Year Development Plan 2016/17-2020/21. Among the objectives of the Plan, Tanzania aims to raise its annual real GDP growth to 10% by 2021.

But the International Monetary Fund (IMF) estimates that the growth of Tanzania’s economy will be 4.0% in 2019, and 4.2% in 2020.

Tanzania Gross National Income (GNI)

The WB classifies Tanzania as a low-income economy according to its GNI per capita which was USD 1,020 in 2018, while average GNI per capita in Sub-Saharan Africa was USD 1,507.

GNI per capita in Tanzania rose by 15% during the five-year period 2013–2018, from USD 890 to USD 1,020 and by 11% over the past one year, from USD 920 in 2017.

According to the Tanzanian Ministry of Finance and Planning’s 2025 Vision, the country aims to become a middle-income country by that year, which requires a GNI per capita between USD 1,045 and USD 12,736.

In 2018, Tanzania’s annual inflation rate declined to 3.5% from 5.3% in 2017 and 7.9% in 2013 due to improved food supply (source: AfDB).

The AfDB estimates that Tanzania’s headline inflation will marginally increase to 5.2% in 2019 and 5.1% in 2020 due to increased government spending.

The WB consistently estimates that Tanzania’s current low and stable headline inflation is aided by low domestic food prices. However, the Bank forecasts that in 2019 and 2020, inflation will increase to 4.9% and 5.1% respectively due to the expected rise in the cost of oil imports.

The TZS weakened by more than 50% against the USD over the past five years, from an average annual exchange rate of 1,735 in 2015 to 2,299 in 2019.

Still, the shilling remained stable during the first half of 2019 with a peak in March at 2,358. According to WB, the projected rise in the cost of oil imports is, however, expected to put pressure on the Tanzanian currency.

FDI net inflows in Tanzania were USD 1.1 billion in 2018 representing an 18% increase compared to 2017 (USD 938 million) and a 30% decrease from the peak reached in 2015 at USD 1.56 billion.

The mining sector, the oil and gas industry, as well as the primary agricultural products sector (coffee, cashew nuts, and tobacco) drew most FDI.

The top five providers of FDI into Tanzania are South Africa, the UK, Kenya, Canada, and China.

Investors are attracted to the country’s commitment to implementing sound macro-economic policies, its effective privatization program, and rich natural resources. However, low levels of industrial development, environmental concerns, lack of transparency and poor compliance with legislation are obstacles to investment

The WB emphasizes that implementing government policies for an improved business environment and subsequently, increased FDI inflows is crucial to sustaining the country’s economic growth.

In the WB’s latest Doing Business 2019 report, Tanzania ranked 144 in ease of doing business (out of 190 countries). In 2017/18, the country has implemented a positive change in making it easier to start a business by launching online company registrations and thus reducing time and costs for entrepreneurs.